A new report has called for the Government to move to a new fully digital system for inheritance tax (IHT).
The Office of Tax Simplification (OTS) has released an 82-page review on the current IHT system which was commissioned by Chancellor Phillip Hammond after he raised concerns over the complexity of the system earlier this year.
At present, of the 570,000 people who die in the UK each year, around half of the families have to fill in the forms. The majority, though, are not liable to pay IHT. In fact, just 5 per cent of estates are caught by the death tax.
Public feedback has described the process as time-consuming and stressful, due to the amount of information HMRC requests, but under current rules probate is not granted until IHT is paid, meaning IHT forms need to be filled out and submitted even when there is no IHT to pay.
In the report, the OTS’S main suggestion was that the government implement a fully integrated digital system for inheritance tax, including the ability to complete and submit a probate application.
However, they understood that a complete digital overhaul would be a lengthy process, so have set out a number of short-term recommendations.
They suggested that HM Revenue & Customs (HMRC) should make changes to the current forms to reduce and simplify the administration of estates, including the introduction of a basic form for the simplest estates and amending the conditions that must be met to be able to complete a short inheritance tax form.
It was also recommended that there was a review of IHT guidance to make it clear and concise, as well as areas that can be automated and more of a link between various Government and tax departments to create a streamlined payment and admin process.
Angela Knight, chairman of OTS, says: “Inheritance tax is both unpopular and complicated. The basic design of the tax itself is for the Government, but at the OTS we can address that most frequent of all comments and at least make it easier for the families to fill in the forms.
“The OTS has worked on ways to address these practical complexities, which have come through loud and clear. The recommendations will make it easier for the majority, and would mean that in future, many may not have to do the forms at all.”
The report is the first of a two part review with the second set to be released in Spring 2019.